Dwelling approval figures back up RBA on rates

Figures from the Australian Bureau of Statistics (ABS) show that dwelling approvals rose in August 2017. According to the Housing Industry Association (HIA), these figures support the recent decision by the Reserve Bank of Australia (RBA) to keep rates on hold for the fourteenth consecutive month.

According to the ABS, the number of dwellings approved rose 1.1% in August 2017, in trend terms, and has risen for seven months. In seasonally adjusted terms, dwelling approvals increased by 0.4% in August, driven by a rise in private dwellings excluding houses (4.8%), while private house approvals fell 0.6%.

However, despite the recent rises, residential dwelling approvals are down by 6.5% on a year on year basis. According to the HIA, approvals in August 2017 remain around 11% lower than their 2016 peak, indicating a gradual slowdown in activity that is expected to progress for the next couple of years.

HIA principal economist, Tim Reardon, said that the RBA’s move to drop interest rates to the record low was instrumental in bringing 2016’s new home building starts to an all-time high:

“A move to increase rates at this time would unnecessarily compound the decline in activity that is already underway.”

“The market is already adjusting to constraints on domestic and foreign investors.”

“Increases in energy costs have had a similar impact to an increase in interest rates by restricting both corporate and household consumption. Combined with low wage pressures and the Australian dollar having appreciated, it is unlikely that the RBA will need to move rates in the near future.”

Dwelling approval changes in August 2017

Source: ABS

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